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Kerala to set up first Islamic i-firmThe Kerala government, in partnership with a few private entrepreneurs, will set up
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The Kerala State Industrial Development Corporation (KSIDC), along with a few NRIs (predominantly from the Gulf) and local entrepreneurs, will jointly float the fund. The state government will permanently hold 11% stake in the investment firm.
“The fund will start with a corpus of Rs 100 crore, in a year’s time, the equity base would be expanded to Rs 500 crore. The government has already set aside Rs 11 crore, as a draw-down for the first year,” said a senior KSIDC official.
Although in its conception stage, the fund is witnessing good investor interest. Among other investors, P Mohamed Ali, managing director of Oman-based Galfar Engineering and Contracting Company; MA Yusuf Ali, owner of Dubai-based EMKE Group; promoters of Kerala-based Muthoot Group and Krishnan Menon, chairman of the Qatar-based Behzad Group, will invest in the company.
As per the memorandum of the investment firm, any shareholder who invests more than a crore will be entitled for directorship in the company. To start with, the firm will have nine working directors, two of whom would be from KSIDC.
“We’ll start off with Islamic leasing; in a year’s time, the company will start disbursing housing loans. It will also consider other Shariah-based investment options. Ernst & Young, in its feasibility study report, has proposed the formation of a non-banking financial company (NBFC) with more funding from central and state government agencies,” the official said.
The firm will start Islamic leasing, which does not require any regulatory approvals, over the next few months. Islamic leasing, or Ijara, is a mark-up structure, where the investment firm buys capital equipment or property and leases it out under instalment plans to end-users. The bank being the owner of the asset is paid rent, fixed or variable, as agreed by the parties.
KSIDC has also approached the Mumbai-based Taqwaa Advisory & Shariah Investment Solutions to set up a Shariah-advisory board on capital investments, say sources. Shariah, the canonical law of Islam, has strictures regarding finance and commercial activities for believers.
Believers only invest in ‘clean’ assets. They do not invest in companies dealing in alcohol, conventional financial services (banking and insurance), entertainment (cinemas and hotels), tobacco, pork, defence and weapons. Investing in companies with high-debt ratio is also considered unethical as per Shariat, say experts.
